Buying a home should be an exciting adventure. It can be, but it’s often accompanied by a good amount of confusion and a lot of stress. Home prices throughout Greater Boston are still rising and inventory is limited, even during the COVID-19 pandemic. Still, with the right financial life hacks, you can make your life much easier when searching for and buying a new house. That’s why we present these 6 financial life hacks that buyers can use when buying a home in Boston.
1. Prepare Thoroughly
Thorough preparation always makes any undertaking go much more smoothly, and it’s no different for buying a home in Boston. The many steps you should take before beginning your house search include:
ASSEMBLE FINANCIAL DOCUMENTS
This financial life hack may the most important because your financing depends on it. Here’s what the financial experts recommend – get your financial documents in order. Bank statements, pay stubs, W-2s, tax returns – basically every financial document you have on yourself will be required whenever you apply for a loan or a pre-approval letter. Organize them now so you can make the necessary requests if you’re missing anything. If you have a specific bank in mind, ask them for their mortgage loan checklist so you know exactly which documents they will need.
TUNE-UP YOUR CREDIT SCORE
Do everything you can to improve your credit score. The higher your score, the better the terms and rate you can get on your mortgage.
DETERMINE HOW MUCH HOUSE YOU CAN AFFORD
Before you begin shopping, you need to figure out exactly what you can afford, which will most likely be determined by the limits of your pre-approval letter. Ultimately, this will save you a lot of time and effort because you won’t be looking at houses beyond your reach.
PAY DOWN DEBT
Begin paying down your debt a soon as possible in order to improve your back-end ratio, your total debt-to-income ratio.
Pre-approval is a conditional commitment from your lender that they will give you a mortgage at or below the pre-approval amount. It requires a good bit of effort (because it involves a mortgage application and verification of your financial information), but a pre-approval letter makes your offer stronger because the seller knows you are able to get a loan. Without one, your offer will be weak, and will likely be rejected especially if offers from other buyers are also on the table.
2. Investigate Low Down Payment Options
For many people, a large portion of the stress of buying a home in Boston comes from figuring out how to come up with that huge down payment. If you haven’t figured that out yet, don’t despair – there are several low down payment options – such as FHA Loans, VA Loans, and Conventional 97 Loans – that you can investigate. In fact, there are dozens of these options, many of which are aimed specifically at helping first-time home buyers. Some of the programs even help with closing costs.
3. Buy Conservatively, Pay Down the Principal
Having a huge mortgage hanging over your head for 30 years is just no fun at all. But buying a home in Boston doesn’t have to be that way. What you can do instead is buy conservatively (below your means) and then apply the money you’re saving each month on mortgage payments to the principal. That way you’ll pay off the mortgage much sooner and save a significant amount on what you’d pay in interest over the life of the loan. Then, if you choose, you can sell your current house and use the proceeds to upgrade, or you can refinance your loan if rates decrease or your situation changes.
4. Look into Assuming Seller’s Mortgage
Another financial life hack and viable way to reduce stress and make buying a home in Boston more affordable and achievable involves assuming the seller’s mortgage. This is a growing trend in which the buyer, if she qualifies, just assumes the seller’s mortgage terms. To make up the difference, the buyer either pays cash or takes out a second mortgage to cover it.
Here’s where an assumable mortgage can be a real boon to you as a buyer:
A few years ago, the Fed’s bond-buying program enabled millions of homebuyers to refinance their mortgages at extremely low interest rates and some are assumable. As mortgage rates are expected to rise over the coming years, a seller with an ultra-low rate that is assumable would be an extremely attractive opportunity for any buyer.
5. Ask for Closing Concessions
Another financial life hack buyers can use when buying a home in Boston is asking for closing concessions. For example, the seller would pay some or all of the closing costs in exchange for a slightly higher sale price. When you’ve already used up all your available cash for the down payment, this presents a way for you to close the deal. Closing costs, for example, for a $400,000 condo will amount to about $6,000. But rolling that cost into the mortgage would increase monthly payments by only about $30 over the life of a 30-year mortgage.
6. Ask Us!
We realize this is a lot to take in, so our final financial life hack buyers can use when buying a home in Boston is this – use your NextHome Titletown Real Estate agent to the fullest. We’re not here just to run the Open House and collect a commission check. A good real estate agent will be available to answer all your questions and provide the guidance you need. It’s our job to look out for your best interests.
Learn more great financial life hacks to help you when buying a home in Boston! Contact us today for more!
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The property listing data and information set forth herein were provided to MLS Property Information Network, Inc. from third party sources, including sellers, lessors and public records, and were compiled by MLS Property Information Network, Inc. The property listing data and information are for the personal, non commercial use of consumers having a good faith interest in purchasing or leasing listed properties of the type displayed to them and may not be used for any purpose other than to identify prospective properties which such consumers may have a good faith interest in purchasing or leasing. MLS Property Information Network, Inc. and its subscribers disclaim any and all representations and warranties as to the accuracy of the property listing data and information set forth herein.